AlterNet: Is Bank of America Headed Toward Collapse?

[marmar]

AlterNet / By Sarah Jaffe

Is Bank of America Headed Toward Collapse?
The nation's largest bank has only gotten bigger since the financial crisis and the government bailouts. But is big trouble ahead for the big bank?

August 14, 2011 |


Bank of America is no stranger to controversy. The largest bank in the United States has seen, in just the last six months, nationwide protests of its branches by groups like US Uncut, National People's Action and other progressive activists angered by the company's tax dodging, foreclosures, massive bonuses (paid after taxpayer bailouts) and other practices.

But could the too-big-to-fail behemoth actually be headed for failure?

On August 5, Yves Smith of the blog Naked Capitalism started a Bank of America Death Watch, writing:

“It is clear that the Charlotte bank has too much in the way of legal liability that it will not be able to shed and yet-to-be-taken writedowns on balance sheet items (for instance, roughly $125 billion of home equity loans and junior liens on residential real estate as of end of last year) for it not to be at risk of a death spiral.”

Back in 2008, Bank of America snapped up Countrywide, one of the subprime lenders that preyed on low-income home buyers, often with adjustable-rate mortgages that ballooned after a couple of years, leaving homeowners unable to make payments. Though it doesn't seem hard to figure out that many people would be driven into foreclosure by such loans, Countrywide was able to repackage these loans into mortgage-backed securities that were then resold as prime products to investors—investors that often were state pension funds, like CalPERS, the funds responsible for paying the benefits owed to public employees. These are the same public employees who are now being targeted around the country as greedy and unwilling to take cuts to their pensions. The unethical actions of big banks and mortgage lenders are at fault, yet working people are expected to take the hit. ........(more)

The complete piece is at: http://www.alternet.org/story/152008/is_bank_of_america_headed_toward_collapse/

[midnight]

1. Sure... they must need another infusion of our tax dollars.

[banned from Kos]

12. Despite the vapid protestations of Yves Smith - final rules for liquidation of TBTF

were issued in July (called the Orderly Liquidation Authority)

http://www.internationallawoffice.com/newsletters/detail.aspx?g=29122b6d-5a95-4c10-985e-5309b2655120

In summary - IF Bank of America's capital falls below regulated minimum - THEN

1- the bank is seized and the D-F Special Purpose Fund is used as temporary capital to winddown the bank.
2- Executive pay is clawed back
3- Shareholders are wiped out
4- Secured creditors are put in line behind the FDIC
5- The parts saved as in a normal liquidation.

Dodd-Frank is not given enough credit for its practical toughness.

[Chimichurri]

2. Bank of America bailout speculation intensifies

Bank of America's mounting woes tied largely to troubled mortgages and a growing number of investors suing over losses from mortgage-backed securities are fueling speculation the nation’s largest bank will eventually need another federal bailout.

Although few expect another bank bailout program like the one adopted in the depths of the financial crisis three years ago, industry analysts and observers say it’s possible the bank could negotiate with the federal government a loss-sharing agreement or balance-sheet restructuring, according to a report in today’s Charlotte Business Journal. A more extreme suggestion, but not out of the realm of possibility given the weak appetite for a costly bank bailout in Washington, is for an outright seizure of the bank.

http://www.bizjournals.com/sanfrancisco/news/2011/08/12/bank-of-america-bailout-foreclosures.html

[Supersedeas]

11. thanks for the link, the BizJournal is usually very polite about reporting of BoA matters

[sfpcjock]

3. Similar to Japan in the 90s they've kept all the junk on the books...

and similar to Bush SEC Chair, Cox, I think the http://en.wikipedia.org/wiki/Naked_short_selling">naked short-selling rules are still in place. When the stock price starts to dip--as have all financials last week--the institutional selling programs kick in and become a self-fufilling prophecy, as one commentator put it.

See http://en.wikipedia.org/wiki/Japan_economic_history#Deflation_from_the_1990s_to_present">Lost Decades (Japan) - Wikipedia

[PoliticAverse]

4. Aren't they "too big to collapse ?"... n/t

[Pab Sungenis]

5. Take them over.

Nationalize them. Make the Bank of America the Third Bank of the United States.

[LiberalFighter]

6. Require banks to be smaller.

Require them to get out of investing as a business.

[Frustratedlady]

8. Amen! Put them back in the community where they belong. EOM

[FarCenter]

7. BAC announced this morning that it is selling Canadian credit cards to TD

BAC is raising cash by selling non-core assets. It is in no danger currently and it would require all the breaks to go against it to be in danger.

Besides, it is too big to fail.

[tjwash]

9. That 10 billion dollar lawsuit by AIG isn't helping them much either

[dixiegrrrrl]

10. Neither is the collapsing stock price.

From a high of around 50.00 in 2008 to 6.41 at one point late last week.